Recently, along with many of its cannabis peers, Tilray (TLRY) stock has seen a fall in its target price. A total of 18 analysts are covering Tilray in October, in line with the previous month. The stock’s consensus target price is down to $42.67, reflecting a 12% fall from its previous target price of $48.58 in September.
On October 21, Tilray was severely underpriced compared to analysts’ consensus target price, giving it ample scope for a rise.
What analysts are saying about Tilray
In the graph above, we can see a drastic drop in Tilray’s target price in the last year. The stock has fallen 71% YoY (year-over-year) from its level of $147.33 in October 2018. Several analysts revised Tilray’s target price downward after it released lackluster second-quarter earnings results despite strong revenue growth. Tilray’s second-quarter revenue rose nearly 4.7x YoY to $45.9 million.
On the flip side, Tilray’s gross margin slumped 1,620 basis points to 26.7% YoY due to expenses related to its capacity expansion. Its EPS fell to -$0.32 in the second quarter compared to -$0.15 in the second quarter of 2018 owing to increased acquisition costs.
Tracking the trend
Over the last 12 months, Tilray stock has gained traction among analysts. In other words, the number of analysts covering the stock has increased from five to 18 in the period. However, its target price has suffered a drastic drop in the same timeframe. In terms of ratings, it has a “strong buy” rating from one analyst, while the majority have given it “hold” ratings.
Most analysts remain cautious on Tilray stock. This sentiment is in line with the slash in its target price. Of the 18 analysts that cover the stock, 11 continue to recommend “holds,” similar to September’s number.
On October 11, Tilray stock hit its all-time low of $20.96. On October 22, it was trading near this all-time low at $22.15. Tilray has lost more than 100% of its value since the release of its dismal second-quarter earnings results. The slowdown in its margins is a big factor for investors to consider. We advise investors to remain watchful and hold their positions.
With the immense opportunity present, Tilray is perfectly positioned to expand and conquer the growing cannabis market. But its margins have been worrying investors. Whether investors take a position in its stock will depend on whether it can deliver on the margin expansion it expects in the quarters to come.